Budgeting-take another look before pasing judgment

By Sen.Doug Whitsett (R-Distr. 28)
Fuzzy Government Math
The Essential Budget Level (EBL) for state spending is defined as the amount of money required to maintain all state services at the current service level for the next budget cycle adjusted for expected case load for each agency.
    
The Co-Chairs of the budget writing Ways & Means Committee are projecting a revenue shortfall of at least $4.4 billion from what is needed to sustain the EBL. In my opinion, the calculation of this huge projected "deficit" requires some fuzzy math.

 

The budget adopted by the legislature for 2007-09 was approximately
$15.1 billion. This was about a 20 percent increase from the previous
2005-07 budget period. Because of the sharp economic downturn, the
projected revenue income for 2007-09 did not materialize. For that
reason, the legislature has imposed nearly one billion dollars in
spending reductions to rebalance the current budget. Therefore, the
actual spending for the 2007-09 budget period is now projected to be
closer to $14.1 billion which is still about a 14 percent increase from
the previous budget.
   
We are now projecting about $12.7
billion in available revenue for the next budget period. For the
purpose of reference, that is a little more than the amount that was
spent in the 2005-07 budget.
   
The difference between the
$14.1 billion spent in 2007-09, and the estimated $12.7 billion to be
available for 2009-11, is about $1.4 billion. When that $1.4 billion
deficit is reduced by about $900 million in federal stimulus dollars,
and by an additional $900 million in state money held in reserve in the
combined Rainy Day Fund and Education Stability Funds the shortfall is
more than filled. In fact, we could have as much as $400 million more
to spend if all those available reserves were used. The striking $4.4
billion difference projected by the Co-Chairs is where the fuzzy math
comes in. The first billion dollars is the difference between the $15.1
billion that was projected to be available to spend and the $14.1 that
was actually available to spend. Most of the rest of the difference is
in what politicians call roll-up costs. They are the combined
calculated inflation in government costs, projected increases in case
loads, and in the promised increase in public employee salary and
benefits. The preponderance of that promised compensation increase for
the next budget was provided by Governor Kulongoski without legislative
authorization or approval.
   
Private sector inflation is near
zero, private sector wage increases are non-existent, and private
sector unemployment is well into double digits in Oregon. If public
sector inflation was also held to near zero, and if public sector
salaries and benefits were held at 2007-09 levels, it appears that the
remaining deficit could be eliminated by less than a five percent
reduction in state employee jobs. In fact, I believe even that five
percent reduction in state employees could be prevented through other
available budget adjustments.
   
According to the Department of
Administrative Services, in 2008 the average Oregon state employee
earned $68,139 in salary and benefits. If they were to agree to a
compensation freeze at 2007 negotiated levels for salary and benefits,
most state employee jobs could be preserved and the vital services that
they perform could be continued at near current levels. We could also
freeze the non-compensation government inflation rate at 2007 levels.
The only significant variable remaining would be case load adjustments
that must be serviced. These services would necessarily be prioritized
by critical need in order to stay within available resources. For more
on state employee compensation, see this USA Today article
<http://www.usatoday.com/money/workplace/2009-04-09-compensation_N.htm>
on the increasing pay gap between public and private sector employees.
   
Many
of the figures used in this analysis are subject to change as the
economic situation continues to run its course. The bottom line is that
the estimated revenue for the 2009-11 budget plus the $1.8 billion
available in federal stimulus and state reserves may actually be
several hundred million dollars more than we actually spent in the
2007-09 budget. That difference may be as much as a 3 percent increase
in actual spending capacity for the next budget compared to the amount
actually to be spent in the current budget period. To keep it in
perspective that projected amount available to spend is still greater
than 15 percent more than was spent in the 2005-07 budget.

Stimulus Package Progress Report
As
you may remember, a state stimulus bill to combat unemployment was one
of the first pieces of legislation passed during this 2009 session.
   
That
bill required borrowing more than $175 million to spend on deferred
maintenance projects that were calculated to create over 3,000 jobs.
Those who promoted the bill guaranteed that these projects had been
carefully analyzed to be "shovel ready," and that the projects would
put unemployed people to work no later than April 1, 2009. They were so
certain of their figures that they did not allow a single amendment to
the bill. They refused to include any other available projects
suggested by other legislators, cities or counties. The legislation was
hammered through both chambers primarily along a party line vote. It
was signed into law with great fanfare by Governor Kulongoski.
   
I
voted against the majority party’s stimulus plan even though it
provided significant stimulus money to be spent in our senate district.
I voted no because I do not believe that it is good economic policy to
borrow money long term to perform current maintenance expenses. I was
also deeply concerned that the plan would not create the jobs that it
promised.
   
April 1 has come and gone. Only about one out of
seven of the promised "shovel ready" projects have been started by the
April 1 deadline imposed in the stimulus bill. According to the Salem
Statesman Journal, sixteen new jobs have been created to date. At the
current rate, the entire $175 million stimulus plan would create a few
more than 100 new jobs. The bill is structured so that taxpayers will
pay back the borrowed $175 million with interest over the next 15 to 20
years. The total cost is expected to exceed $250 million.
   
Senate
President Courtney (D-Salem/Gervais/Woodburn) is quoted in that
newspaper as saying that the delayed response to the stimulus package
is due to "oversight, oversight, oversight." We trust that this
"oversight" will explain why the cost appears to be about $1.5 million,
plus interest, for each new job created. Speaker of the House Dave Hunt
(D-Clackamas County) indicated that he was satisfied with the current
progress of the stimulus package expenditures.
    I think that we
can all agree that a cost exceeding two million dollars for each
temporary job created is not acceptable fiscal policy. For the sake of
the Oregon taxpayers, and of the unemployed workers, we can only hope
that the job creation performance of the economic stimulus package will
improve.

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